More Stories

Informist, Friday, Dec. 5, 2025

By Janwee Prajapati

MUMBAI – Prices of government bonds ended higher after the Reserve Bank of India's Monetary Policy Committee reduced the repo rate by 25 basis points Friday, and the central bank announced a two-tranche open market gilt purchase of INR 1.00 trillion in December, dealers said. Long-term bonds were up more than most other tenures as traders expect the central bank to buy these bonds through open market operation auctions, after RBI Governor Sanjay Malhotra said it has been the central bank's endeavour to provide "diversified" and "balanced" supply of gilts across tenures, dealers said. However, some bond prices gave up gains later in the day.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.89, or 6.49% yield, against INR 99.75, or 6.51% yield Thursday. The most-traded 6.33%, 2035 gilt ended at INR 98.70, or 6.52% yield, against INR 98.63, or 6.53% yield, in the previous session. Both the 10-year bonds gave up gains as traders booked profit after the rise in prices earlier in the day.

Some traders sold gilts with the view that bond prices would not sustain a sharp rise in the near-term, due to uncertainty on the further rate trajectory. This was after the MPC delivered a 25 bps rate cut and the RBI announced liquidity measures. Primary dealers sold the 10-year benchmark bond after picking it up at the INR-320-billion gilt auction. Public sector banks took profits as some available-for-sale books were profitable after the rise in prices. Some traders said foreign banks picked up the 6.48%, 2035 gilt at the auction as they entered the policy decision underinvested. They sold gilts in the secondary market at a profit after the auction.

"There was profit-booking across participants," a dealer at a private-sector bank said. "It was not just PSUs (state-owned banks), the cut-off (price at auction) was slightly on the downside only, so everybody booked profit...they lightened their books."

The RBI set a cut-off price of INR 99.93 on the 10-year benchmark gilt at auction, lower than an Informist poll estimate of INR 99.95. Investor demand for the bond was likely tepid, and asset and liability managers of banks likely gave the auction a miss, dealers said. State-owned banks were not aggressively bidding at the auction, after building heavy portfolios ahead of the policy decision, dealers said. Traders got stuck with auction stock and sold the bond in the secondary market, which led to bond prices erasing some gains, after the auction.

A few traders were optimistic about a further rate cut of 25 bps following the tone and comments of RBI Governor Sanjay Malhotra. Others said that the bar for another rate cut is high, due to higher growth and inflation forecast in the next calendar year. The possibility of another cut is highly dependent on further economic data, dealers said. Bond traders were largely pleased with Malhotra's comments in his statement and in the post-policy press conference, but were not enthused about buying bonds since the future rate trajectory is uncertain. Traders who were stuck with bonds bought at higher prices earlier in the year finally got to sell them due to the rise in prices Friday, dealers said. Moreover, while bond yields may be supported by open market operations, traders expect heavy state bond supply, which will weigh on prices. Investors may prefer higher-yielding state bonds, leaving traders to bear the gilt supply. Malhotra Friday said the RBI would not buy state bonds through OMOs.

Long-term bonds outperformed other bonds on expectations that the central bank would purchase these bonds through OMOs. Traders speculated that the RBI would prefer a narrower yield spread of these bonds over the 10-year benchmark bond. The yield spread between the 6.90%, 2065 bond and the 10-year benchmark bond rose to around 90 bps Friday. Some traders expected the RBI to purchase bonds maturing in up to 15 years whereas others were of the view that it could buy bonds maturing in up to 40 years. The 6.90%, 2065 bond closed at INR 93.90, up from INR 93.40 at market close Thursday. Intra-day it hit a high of INR 94.27. However, traders do not expect the quantum of long-term bond purchases by the RBI to be significantly high. In the OMO auctions conducted in Jan-May, the RBI largely bought gilts maturing in up to 15 years.

Some traders also preferred bonds maturing in up to five-year for trading as they expect the yield curve to steepen. In a rate cut cycle, yields of short-term bonds fall greater than those of their long-term counterparts. Traders also favoured the 6.01%, 2030 gilt for its lucrative spread of around 93 bps over the repo rate of 5.25%. The bond ended at INR 99.33, up 23 paise from Thursday's close.

Traders also said that the spread between the 6.33%, 2035 bond and 10-year benchmark 6.48%, 2035 bond is likely to widen going ahead. They expect the yield on the 10-year benchmark to fall and the yield on 6.33%, 2035 bond to rise as traders will likely shift to the 10-year benchmark bond after its third auction Friday. The spread between the 6.48%, 2035 bond and 6.33%, 2035 bond fell below 1 bps Friday.

OUTLOOK

Gilts are not traded Saturdays. On Monday, gilts will open tracking overnight movement in US Treasury yields and the rupee's movement early in the day. On the global front, investors await the release of the delayed US Personal Consumption Expenditures Price Index data for September, due Friday. Traders will watch out for the US Federal Open Market Committee's rate decision. Fed fund futures are pricing in 87% chance of a 25 bps cut in the federal funds rate, dealers said.

Traders also await news on the appointment of the next US Fed chair, as the current Chair Jerome Powell's term ends in May. US President Donald Trump said he has decided on his pick for the next Fed chair, after making clear he expects the appointee to cut interest rates.

On the domestic front, traders have no cues on rates until CPI inflation data for November, due next week. However, traders are more focussed on CPI prints January onwards, since inflation is seen rising in the near term. Chances of another cut in the repo rate are seen unlikely as of Friday, after the RBI delivered both a rate cut and measures to infuse liquidity, dealers said. 

The RBI will purchase INR 500 billion worth of seven government bonds across tenures through an open market operation auction Thursday, it said in a press release Friday after market hours. The RBI will buy seven gilts--the 6.75%, 2029 gilt; the 7.02%, 2031 gilt; the 7.26%, 2032 gilt; the 6.79%, 2034 gilt; the 7.54%, 2036 gilt; the 6.92%, 2039 gilt; and the 6.67%, 2050 gilt. Traders expect aggressive participation for the bonds across tenures. However, the 6.67%, 2050 paper will likely be tendered at a lower price, dealers said.

"...There are chances of a tail (traders offering the bond at a lower price) in the 2050 bond because not much of this bond must be in-the-money," a dealer at a private sector bank said.

Traders will also track geopolitical developments, especially those related to the India-US trade deal. Most traders expect more clarity on this front by the month-end. With no recent developments, dealers said a continued 50% tariff on India's exports to the US may prompt the RBI to ease monetary policy. Traders may also track Indian Prime Minister Narendra Modi's two-day summit with Russian President Vladimir Putin. Closer ties with Russia could push an India-US trade deal to the backseat, dealers said.

Movement of crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.40-6.56% Monday. The yield on the 6.33%, 2035 bond is seen at 6.40-6.60%.

India Gilts: Off highs; PDs offload auction stock, PSU banks book profit

MUMBAI--1626 IST--Government bond prices were off highs as primary dealers offloaded stock in the secondary market after getting more supply than expected at the auction, dealers said. The Reserve Bank of India accepted 206 out of 334 bids at the auction of the 6.48%, 2035 bond, with the cut-off price set at INR 99.93, slightly lower than the Informist poll of INR 99.95.

Traders avoided building fresh long positions despite the Monetary Policy Committee cutting the repo rate by 25 bps to 5.25% earlier in the day. Demand from investors was firm and widespread but not exuberant, dealers said. State-owned and private-sector banks picked up the 10-year gilt at auction after the repo rate cut. The yield spread of the 10-year benchmark over the new funding cost of 5.25% widened to over 120 basis points.

"PDs are selling in the secondary market," a dealer at the private sector bank said. "They will not carry so much auction supply with them, so they are offloading it in the market"

Several traders who did not have a large stock of the 6.48% 2035 bond likely picked up some of the fresh supply, which led to a surge in the bond's trade after the auction results. Some traders said foreign banks entered the policy decision underinvested and stepped up their purchases at the auction after covering some short bets in the secondary market so far in the day. However, others said foreign banks and portfolio investors were trimming their gilt holdings rather than buying them after the rate cut.

The outlook for further rate cuts remained clouded, dealers said, as comments from policymakers suggested the bar for rate reductions was high. The RBI's inflation estimates for both 2025-26 (Apr-Mar) and the first two quarters of FY27 were in line with or lower than traders' estimates. While this kept rate-cut hopes alive and a rate hike in 2026 off the table, traders believed there would be a high bar for policy easing, which in turn hurt demand for bonds.

"As a trader, you are now at a level where you are being asked to absorb large supply near a cyclically low level of yields at the end of a rate cut cycle," a trading head at a primary dealership said. "The hope of another rate cut is also subdued, and as the governor hinted, term spreads should very much widen with a lower repo rate."

In the post-policy press conference, RBI Governor Sanjay Malhotra said that term spreads were currently similar to when the policy repo rate was 5.15% in 2019. He said that the central bank was conducting open market operations – the RBI announced the purchase of gilts worth INR 1 trillion in two tranches in December – not to influence government bond yields but to add durable liquidity. After hitting a near-three-month low of 6.45% yield, the 10-year benchmark yield rose to over 6.50% following the auction results. 

Malhotra also said that the year's low on the 10-year gilt yield, sub-6.20%, was influenced by the RBI's large OMOs – the central bank has already bought INR 5.2 trillion of gilts in 2025 – and would not have been as low without such a large quantum of demand from the RBI. Supply-demand factors would continue to influence gilts, and rate cut transmission to the bond market was adequate, even as the RBI endeavoured to ensure supply was best matched to demand, Malhotra said. 

At 1630 IST, the turnover in the gilts market was INR 759.75 billion, sharply higher than INR 396.90 billion at the same time Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 benchmark bond is seen at 6.42-6.52%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.46-6.54% for the rest of the day. (Aaryan Khanna and Janwee Prajapati)

India Gilts: Remain sharply up post MPC; 10-yr bond sale seen sailing through

MUMBAI--1126 IST--Prices of government bonds remained sharply up as traders perceived the outcome of the Reserve Bank of India's Monetary Policy Committee meeting as positive, dealers said. The INR 320-billion auction of the 10-year benchmark 6.48%, 2035 gilt is seen sailing through, at a cut-off price similar to current secondary market prices, dealers said. Gains were capped as state-owned banks sold gilts at a profit, dealers said. Traders await comments by RBI Governor Sanjay Malhotra at the post-policy press conference at 1200 IST.

"PSUs (state-owned banks) definitely booked profit, infact everybody did," a dealer at a state-owned bank said. "Even during the commentary, it (bond prices) rose and then it fell due to profit booking." State-owned banks took profits from their available-for-sale books, which were "in-the-money", or profitable, after the sharp rise in prices, dealers said.  

The 10-year benchmark bond auction is seen sailing through. The Deposit Insurance and Credit Guarantee Corp. is seen bidding for around INR 40 billion to INR 50 billion of the gilt. Traders from across market segments are seen bidding for the gilt, at prices near to, or at current market prices. 

The MPC cut the repo rate by 25 bps, a move several traders were not expecting after a knockout GDP growth print of 8.2% in Jul-Sept. Along with a rate cut, the RBI also announced an open market purchase of gilts in two tranches this month itself. At the auctions to be held this month, traders expect most of the bonds to be bought back to be of tenures within seven to 15 years. Traders expect the RBI to announce more such OMO auctions for January.    

The tone and comments of RBI Governor Sanjay Malhotra raised expectations of another 25 basis points rate cut in February, though those bets hinge on further economic data, dealers said. The yield curve is seen steepening in the near term, as traders prefer short-term gilts on expectations of further policy easing, dealers said. In a rate cut cycle, short-term bond yields fall more than their long-term counterparts. 

Due to a technical error on the Clearing Corp. of India website, information on the total turnover on the RBI's Negotiated Dealing System-Order Matching platform for 1130 IST was not available. The yield on the 6.48%, 2035 benchmark bond is seen at 6.40-6.50%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.46-6.50% for the rest of the day.  (Janwee Prajapati and Cassandra Carvalho)

India Gilts: Rise on rate cut, OMO, off highs on short bets before bond sale

MUMBAI--1021 IST--Prices of government bonds were off highs on likely short sales before the INR-320-billion fresh supply of the 10-year 6.48%, 2035 bond later in the day, dealers said. Bond prices surged at the beginning of Reserve Bank of India Governor Sanjay Malhotra's statement after he said the Monetary Policy Committee cut the repo rate by 25 basis points to 5.25%. A 25-bps rate cut was not fully priced into bonds, dealers said. Malhotra's comments also increased chances of another repo rate cut at the MPC's February policy, dealers said. Malhotra said the growth-inflation balance continues to provide policy space. 

"Must be because of auction, people must be placing short bets. There's nothing negative in the policy, he's (Malhotra) very dovish only," a dealer at a private sector bank said. "Everyone knows that it won't go below 40-45 (6.40-6.45% yield on the 10-year benchmark bond), so this is some intraday shorting."    

The governor also announced an INR 1.00-trillion open market purchase of gilts through auction in December. Traders were hoping for INR 2.00 trillion of OMO buys, but very few traders were expecting both an OMO announcement and a repo rate cut. Several traders were also not expecting OMOs in December itself. Following the remarks, the yield on the 10-year benchmark gilt fell to 6.45%, but recovered slightly from the fall shortly after.

At 1027 IST, the turnover in the gilts market was INR 351.70 billion, higher than INR 71.05 billion at 1030 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 benchmark bond is seen at 6.35-6.51%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.46-6.52% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Up on expectations of rate cut, OMOs ahead of MPC decision

India Gilts: Up on expectations of rate cut, OMOs ahead of MPC decision

MUMBAI--0927 IST--Prices of government bonds were up on expectations of Reserve Bank of India Governor Sanjay Malhotra's statement pulling bond yields lower. Malhotra's address begins at 1000 IST. Some traders expect the RBI's Monetary Policy Committee to deliver a 25 basis point rate cut Friday, and those who do not expect a cut Friday expect the governor to leave the door open for a rate cut in February. Traders are also betting on the announcement of a calendar for open market operations to purchase gilts by auction, of around INR 2.00 trillion. Depending on the policy outcome, on the downside, the 6.48%, 2035 bond yield is seen falling to 6.35%, and rising to 6.62% on the upside Friday. 

"People are expecting some dovish comments from policy, some hints of OMO next quarter or something dovish, he (RBI) could lower inflation forecasts," a trader at a primary dealership said. "Even if he doesn't cut rates this time, he will keep room open for cuts in the next policy." 

During the governor's statement, traders will track Malhotra's comments on inflation, growth and liquidity. Traders will also assess the panel's voting patterns, on the repo rate and policy stance. Some traders expect the RBI to downgrade its CPI inflation forecast for FY26 by around 20 bps from 2.6%, due to near-zero inflation in October, and the Centre's cut in goods and services tax in September. On the liquidity front, traders are betting on an OMO calendar, and an announcement of dollar/rupee buy/sell swap instead could lead to a sharp fall in bond prices, dealers said. Some dealers in the foreign exchange market expect a dollar/rupee buy/sell swap announcement Friday. 

At 0927 IST, the turnover in the gilts market was INR 30.05 billion, higher than INR 10.75 billion at 0930 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 benchmark bond is seen at 6.35-6.62%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.40-6.70% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Seen steady; traders divided on rate cut, OMOs

MUMBAI – Prices of government bonds are seen opening steady Friday ahead of Reserve Bank of India Governor Sanjay Malhotra's monetary policy statement at 1000 IST. Traders are divided on the outcome of the RBI's Monetary Policy Committee meeting, calling it the "trickiest" policy decision this year. 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.35-6.60% after ending at INR 99.75, or 6.51% yield, Thursday. The yield on the most traded 6.33%, 2035 bond is seen at 6.40-6.70%, against INR 98.63, or 6.53% yield in the previous session.

Some traders expect the rate-setting panel to cut the repo rate by 25 basis points to 5.25% Friday, and largely expect this to be the last cut of the rate easing cycle. This is due to the narrow window of low inflation, inspite of a strong GDP growth print of 8.2% in Jul-Sept, dealers said. Others expect that instead of cutting rates, the RBI could announce a calendar of open market operations to purchase gilts through auctions. Traders have priced in a calendar of INR 1.5 trillion, and expect a quantum of INR 2.00 trillion to INR 3.0 trillion to pull the 10-year benchmark bond yield down by around 5 bps. Traders expect the auctions to be held in Dec-Mar, as the RBI's dollar sales to limit the rupee's depreciation drain liquidity in a time of seasonally low liquidity.

Traders expect a soft tone and commentary from the committee and governor, such as showing concerns about the future growth trajectory, comfort with low inflation and acknowledging low nominal GDP growth. If not Friday, the MPC could cut rates in February, dealers said, but traders hope for indications of more than one 25-bps cut by Feb-end.

While seen unlikely, a change of stance by the MPC to 'accommodative' from 'neutral' would see a sharp fall of at least 10 bps in the 10-year benchmark yield, dealers said. The voting pattern of the committee is largely seen unanimous, especially if the panel holds rates steady. On the data front, some traders expect the RBI to downgrade its CPI inflation forecast for FY26 by 20 bps from 2.6%, due to near-zero inflation in October, and the Centre's cut in goods and services tax in September. The RBI has already forecast that CPI inflation is seen rising to 4.0% and above the next calendar year, which makes December an ideal time to cut the repo rate, some dealers said. Most traders expect the RBI to raise its GDP growth forecast for FY26 by 30 to 40 bps from 6.8%. However, the near-term growth trajectory is seen weakening due to US tariffs on Indian exports, boosting the case for a rate cut, dealers said. 

Bidding at the INR-320-billion auction of the 10-year benchmark 6.48%, 2035 gilt would hinge on the MPC meeting's outcome, dealers said. Thursday, traders covered some short bets in 10-year gilts, inspite of fresh supply Friday. Bond prices may also track the movement of the rupee against the dollar Friday, dealers said. After the rupee had hit a record low, some traders had feared that the MPC would refrain from cutting rates Friday to prevent further depreciation in the local currency, dealers said. Some traders said the rupee's fall also indicated that it was pricing in a rate cut. Gilts and overnight indexed swap rates are currently not fully pricing in a 25 bps rate cut Friday.

The yield on the benchmark 10-year US Treasury note was 4.09% at 0800 IST, unchanged from 1700 IST Thursday. Post market hours, investors await the release of the delayed US Personal Consumption Expenditures Price Index data for September. (Cassandra Carvalho)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.